Decision to hold small business tax rate will boost revenue, but cost jobs: PBO

The parliamentary budget watchdog says a decision by the federal government to put on hold a Tory plan to reduce the small business tax rate will boost government revenue, but cost jobs.

The PBO says the changes in the budget to the small business tax rate will reduce annual federal revenues by $45 million in 2016-17, but increase revenues by $155 million in 2017-18 rising to $815 million in 2020-21.

However, the boost is not without consequences.

The decision will reduce real GDP by $300 million or 0.015 per cent in 2020-2021 and the level of employment by 1,240 workers.

The report by the PBO follows a request by Conservative MP Pierre Poilievre.

The Tories announced in the 2015 budget that the small business tax rate would gradually fall from 11 per cent in 2015 to nine per cent by 2019.

The Liberals had endorsed the plan in their election platform, only to say in the spring budget that they would defer future cuts to the tax and keep it at 10.5 per cent.